In a fresh sign of its foot-dragging on deregulatory and other economic-reform efforts, Japan has rebutted a U.S. proposal to compile and submit a new joint progress report on investment issues to their top leaders later this month.
Government sources said Friday that the U.S. State Department asked Japan to compile the investment report on the basis of discussions at a March 1 symposium in Tokyo.
The symposium was organized by the governments of the two countries to address what the U.S. perceives as Japanese legislative, regulatory and other barriers to foreign investment. The aim was to make the Japanese economy more inviting to foreign investors.
But Japan rejected the U.S. request on the grounds that the symposium, which was attended by private-sector people and government officials from both countries, was held simply for a free and informal exchange of views, the sources said.
“The U.S. wanted to compile a new report containing measures to be taken by Japan in a wide range of areas, including the taxation system, to reform its economic structure and thereby make merger and acquisition activities in Japan easier,” said a source at the Ministry of International Trade and Industry.
“But most Japanese government ministries and agencies objected to compiling any such new report for submission to the top leaders of the two countries.”
Prime Minister Yoshiro Mori and President Bill Clinton will meet in Tokyo immediately before the three-day summit of the Group of Eight major countries in Okinawa, which opens July 21. Instead of submitting a new progress report on improvements in the Japanese investment environment, the two countries are considering presenting Mori and Clinton with a summary of the discussions held at the March symposium, the sources said. But even if the two countries take this course of action, the summary should not be used by the U.S. in the future as ammunition to pressure Japan into taking additional measures to improve its investment environment, the sources said.
The symposium was organized by the Working Group on Investment and Buyer-Supplier Relationships, which has been meeting since 1993 under the auspices of the Framework for a New Economic Partnership. The Framework for a New Economic Partnership (or the Japan-U.S. framework talks) was launched in July 1993 by Clinton and then Prime Minister Kiichi Miyazawa. In the framework talks, the U.S. has urged Japan to remove what it perceives as legislative, regulatory and other barriers to foreign direct investment in Japan.
The Working Group on Investment and Buyer-Supplier Relationships adopted a document in July 1995 describing and prescribing policies and measures aimed at improving the investment climate in both Japan and the U.S. The group has since been monitoring progress on policies and measures included in the document.
During the asset-inflated bubble economy of the late 1980s, the value of Japan’s foreign direct investment abroad was up to 20 times higher than foreign direct investment in Japan.
Although foreign direct investment in Japan has risen sharply in recent years, contributing to the rapid narrowing of the investment imbalance, the U.S. remains dissatisfied.
U.S. Treasury Secretary Lawrence Summers, for example, reportedly said in Tokyo early this year: “As I look at economic developments, there is a sense of some increase in confidence and some increase in foreign activity here. But there is also a sense of barriers.” He said that the barriers discriminate against foreigners in some cases and block investment in others.
Mori’s Liberal Democratic Party-led tripartite coalition managed to retain a comfortable majority in the Lower House in elections June 25. Mori is expected to form his new Cabinet today.
But a huge loss of seats in the powerful Diet chamber for the coalition parties has raised concern in the U.S. that the coalition government might slow down the pace of deregulatory and other economic reforms for fear of alienating its traditional support groups.
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